Economics Elasticity Of Supply Questions
The difference between elastic and inelastic supply lies in the responsiveness of quantity supplied to changes in price.
Elastic supply refers to a situation where a small change in price leads to a relatively larger change in quantity supplied. In other words, the supply is highly responsive to price changes. This occurs when producers can easily adjust their production levels in response to price fluctuations, such as having excess capacity or readily available resources. The elasticity of supply is greater than 1 in this case.
On the other hand, inelastic supply refers to a situation where a change in price leads to a relatively smaller change in quantity supplied. In this case, the supply is less responsive to price changes. This occurs when producers have limited ability to adjust their production levels in response to price fluctuations, such as having fixed production capacities or scarce resources. The elasticity of supply is less than 1 in this case.
In summary, elastic supply is highly responsive to price changes, while inelastic supply is less responsive to price changes.